SENATOR DEMANDS BANK-CASE INQUIRY

By ELAINE SCIOLINO,

Published: October 15, 1992

WASHINGTON, Oct. 14—
In an extraordinarily blunt letter to Attorney General William P. Barr, Senator David L. Boren, the Intelligence Committee chairman, asserted today that the Justice Department and the Central Intelligence Agency had misled prosecutors, a Federal judge and the American people in the case of a multibillion-dollar bank fraud involving Iraq.

The Senator's letter, laying out the reasons for his concern, called for Mr. Barr to immediately reverse his decision rejecting the appointment of an independent counsel to investigate the two agencies' handling of the case.

Mr. Barr turned down a similar request in August from the House Judiciary Committee, and Senator Boren's appeal is likely to put new pressure on him to reconsider. Senator Joseph R. Biden Jr., Democrat of Delaware, who is chairman of the Judiciary Committee, was consulting members of his panel today on the issue.

The Intelligence Committee, which will open its own investigation on Friday, informed the Justice Department today that it intends to send a team to Atlanta to take sworn statements from the prosecutors and investigators. Gates Expected to Testify

Mr. Boren, who is a lawyer, will also call a number of C.I.A. officials, including Robert M. Gates, the Director of Central Intelligence, to determine whether the agency cooperated fully in the investigation of the case, which involved the making of billions of dollars in loans to Iraq. The committee will also interview senior department officials, but has not yet decided whether to interview Mr. Barr or former Attorney General Dick Thornburgh.

"A truly independent investigation is required to determine whether Federal crimes were committed in the Government's handling" of the case, Mr. Boren said in the letter.

The Justice Department said that Mr. Boren's demand for an independent prosecutor was motivated by partisan politics. "You can expect the Democrats to make these calls every day for the next three weeks," said Paul McNulty, a department spokesman.

A C.I.A. spokesman, Mark Mansfield, said the agency would not comment.

In his letter, Senator Boren listed four reasons why Mr. Barr should reverse himself: the recent discovery of classified documents relevant to the case; the strong public criticism of the prosecution by Judge Marvin H. Shoob, who recused himself because of his opinions about the case; a C.I.A. admission that, at the strong urging of the Justice Department, it produced what the Senator called a "misleading letter" to the prosecutors, and the announcement by both the C.I.A. and the Justice Department that they have started investigations of the case.

The Senator also made new charges. He said that documents continue "to trickle out of the C.I.A.," adding that prosecutors and Judge Shoob were not given documents that his committee had earlier received, and that his committee only last week received documents that had been given to the Justice Department. Who Was Responsible?

And Mr. Boren called into question the Justice Department's charge that the C.I.A. failed to produce documents. He said in a statement that the F.B.I., part of the Justice Department, "received or was knowledgable of nearly all of the key classified reports at the time they were originally issued."

Over the last few months, the case has turned from a simple bank fraud into one that had implications for American relations with Italy and Iraq.

A newly disclosed Justice Department memo, for example, shows that Rinaldo Petrignani, Italy's Ambassador to the United States, in a breach of diplomatic protocol, accompanied bank officials to a meeting with the Atlanta prosecutors and investigators.

A year and a half after Federal agents raided the Atlanta branch of the Banca Nazionale del Lavoro, prosecutors indicted the manager, Christopher P. Drogoul, charging him with loaning Iraq billions of dollars in violation of bank regulations, and therefore, of defrauding his superiors.

More than three years after the raid, the C.I.A. is still uncovering documents that might have helped establish the complicity of the Rome headquarters in the case. But such revelations would have weakened the case against Mr. Drogoul and might have implicated the Rome bank, which is almost wholly owned by the Italian Government.

The Senate panel's investigation will also focus on whether C.I.A. officials themselves had access to all relevant documents when writing certain reports, or whether the internal system is so compartmentalized that it shuts out the agency's own officials.